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How much profit has Kroenke actually earned out of his Arsenal shares?

Following on from yesterday’s post about how much Arsenal really have to spend this summer, one of our contributors, Sean, has sent me this article from the excellent Arsenal Blog AngryOfIslington detailing exactly how much Stan Kroenke’s investment in Arsenal has grown over the years. A very interesting and factual read….

If Stan Kroenke Sells Arsenal, How Much Profit Does He Make? by Phil from AngryOfIslington.com

Stan Kroenke is the first ever majority owner in Arsenal’s history, currently holding just over two-thirds of the shares. Specifically, as at May 2018, he holds 41,743 shares of the total of 62,219, which is 67.09 per cent.

If he decides to sell up, how much profit will he make? I can’t be completely precise about this because I don’t know exactly how much Kroenke paid for every Arsenal share he’s bought. For a couple of years he bought small numbers on the open market in numerous transactions at a variety of prices.

His first purchase though was to pay ITV £65m for 9.99 per cent of Arsenal plus half of Arsenal Broadband. The split announced for this was £42.3m for the shares and £22.7m for half of Arsenal Broadband, which is slightly odd when you consider these facts:

Arsenal Broadband had never (and still hasn’t) made a profit – so why was it apparently worth £45m?

9.99 per cent of Arsenal is about 6,220 shares; £42.3m for 6,220 shares is about £6,800 per share; the going market rate for an Arsenal share at the time was about £8,500.

Is that the smell of dodgy accounting? Can’t be, can it?

So officially that’s £42.3m spent, but on market rate it’s about £53m.

After that Stan bought many smallish blocks of shares, anything up to a couple of hundred at a time, at prices ranging from £6,750 to £9,000 each. I can’t account for all of these individually, but I know from various points what his total was at the time and I know the prevailing market price at any time, so I can make reasonable estimates of his expenditure. The ones I can’t easily trace come to only about five per cent of his total purchases.

On the big blocks, he bought 5,000 shares from Danny Fiszman at £8,500, then 2,720 from the Carr family at the same price and a further 2,119 from the Carrs at £10,500.

He then made a deal with his fellow Board members to take majority ownership of the club, which resulted in the largest amount purchased at one time. In April 2011 he bought Danny Fiszman’s remaining shares, Lady Nina’s shares and others from small shareholders. These totalled around 22,900 shares at £11,750 each, taking his shareholding from just under 30% to 66.8%. After that the price rose further and he added a few more at prevailing prices, probably an average of £14,000 per share.

Add all this together and my estimate of Stan Kroenke’s total expenditure on Arsenal shares is:

£424 million.

Or £435 million if you add in the extra roughly eleven million that he would have paid for the shares he got when he got his 50% of Arsenal Broadband, if he’d bought them for market price. I’ll stick with the dodgy official valuation of Arsenal Broadband for the rest of this, though.

So how much would Stan make if he sold up? Well the multi-million dollar question is, how much is someone going to give him? (The other multi-million dollar question is would he sell at all?)

Following the KSE takeover the price of Arsenal shares continued to rise, hitting a high of £17,500 in late 2012. It then dropped for a while when both Kroenke and Alisher Usmanov stopped actively buying. The volume of shares traded since 2014 has generally been very low, which might normally lead to stagnation of the price, but the increased income of Premier League football clubs from TV deals has pushed the value of all clubs higher, and the scarcity of Arsenal shares means individual transactions can be negotiated between buyer and seller. Because of these factors, and perhaps also because of speculation that Kroenke might sell at some point, the price had been pushed to a new high of £18,250 by April 2017. There was much more speculation during the summer, with both Kroenke and Usmanov rumoured to be bidding for each other’s shares. Although none of these rumours were substantiated, the share price was pushed to £28,000. Any price for individual shares is only an indication of what might happen in a deal between the two major shareholders, though.

Stan has 41,743 shares, so for every thousand pounds his selling price rises, he pockets another £41.7m. Thus his potential profit looks like this:

Share price of £14k – Profit £160m

£17k – £285m

£20k – £410m

£23k – £535m

£26k – £660m

£28k – £743m

£30k – £827m

£32k – £910m

£34k – £994m

£36k – £1,079m

£37k – £1,120m

So a price of ‘only’ £20.5k per share would give Kroenke a 100 per cent return on his investment, give or take miscellaneous expenses – though they can be offset by the total of £6m in fees he took out in 2014 and 2015.

£20.5k looks a long time ago now. More likely it would be well over £30k per share, and £34k would give Kroenke a billion pound profit. The prevailing price at time of writing is £37k per share, which means a profit of £1,120,000,000.

Valuing football clubs accurately is not easy as it’s an extremely volatile business, with success dependent on a huge number of factors that are hard to control. In the end clubs are worth what someone will pay. Forbes valued Arsenal at $2.017bn in May 2016, about £1.392bn at the exchange rate then, which would give a share price of £22,368. In 2017 they raised this to about £1.6bn, which would be a share price of close to £27k. For the first time, the actual share price has gone above the Forbes valuation.

What I’ve talked about here is Kroenke’s profit in pounds sterling. What will also concern him is the dollar/pound exchange rate. From when he started buying Arsenal shares to mid-2016 it had varied from about $1.39 and $2.06 to the pound. It’s since fallen to around $1.25 to the pound. This will certainly affect the price Kroenke would be prepared to accept to sell his stake in Arsenal, if indeed he was considering such a move.

Real Madrid have made a move for Arsenal Wenger and he could be their coach as he’s in talks with them.
Various outlets reporting Arsenal offered Ramsey a new contract.I brought this news to you yesterday but one thing I can tell you is the deal is already done.The captaincy thing is very true.
Lichtsteiner is due in London Colney today for his medical and Yacine Adli is also on his way to Colney to sign for the club.
I brought you the news of Napoli using Torreira to replace Jorginho long ago and at last the deal is set to happen.

It’s interesting in some ways as it improves on the usual he’s not in it for the money claim we hear at times. It’s obvious he uses clubs to generate enough collateral to buy bigger things. It’s a simple case of some people won’t be happy no matter how much they have. This man needs removing but I cannot see anyone offering what he would need or want

One day wenger will write a book telling us all what kroenke has been up to and what his long term plan is and hopefully he does it just before kroenkes son takes over so that the fans will only except him as owner if he spends on transfers. I’m basing that on the information that Wenger gives as being unexceptable behaviour by kroenke meaning his son will have to make a mense for his dads crooked and tight ways, otherwise we won’t except the transfer budgets and low spending! Kroenke is playing the long game by making so much profit on what he’s already purchased but the end game doesn’t make sense when he could sell the club now for 2bn if someone was willing to pay. I think Arsenal is his family investment for generations due to it being the most profitable and LA rams is his club he supports so he’s more likely to invest in players at LA rams so our only hope is for josh kroenke to be pressured by the fans so much that he either invests in afc transfers or sells up (after Wengers book called the can worms) lol if only he excepted usamanovs offer last year we would have a chance of mbappe one day the Henry we’ve been waiting for

Great post! Looks like we’re in a bit of a double whammy then, if we perform well (make champions league places) with Unai then I don’t see Stan selling for a long time, meaning Arsenal can get used to staying at that level and forever being run frugally cause Arsenals share prices would be too expensive for anyone who would be interested in us for footballing reasons (Usmanov). On the flipside if we perform bad enough and our share prices plummet then Stan would dump his shares, hopefully allowing someone more passionate to step in but we’d face a massive uphill battle to get back to the top much like Liverpool have faced. Either way we can only hope for the best! Onwards and upwards fellow Gooners

As Arsenal is a listed company on the Stock Exchange he cannot use the value of the club as collateral to obtain loans unless it’s declared to the Stock Exchange, which has never happened. He has only ever taken a total of £6 million out of the club in 2014 and 2015, nothing since. There could of course have been some dodgy accounting but my question is, what really are his motives? Is he just gambling the share price will really rocket and then sell? Who knows but for feck sake, how much money does someone need?
In other news, Abramovich has halted all plans to rebuild Stamford Bridge and Ramsey has been offered a new contract.

I agree, they are not on the public exchange, they are on the NEX exchange which i understood was subject to similar rules but I bow to your superior knowledge if they are not. Thanks for your correction.

How do Man City, Man Utd and Liverpool pay for players? They borrow money? Particularly at the present interest rates. All major companies borrow money to create growth. That is normal. Arsenal try to explain their methods as being the best. Actually Arsenal/Kroenke/Gazidis methods have left us behind those clubs and even Tottenham. Kroenke is in many ways a nightmare owner as he doesn’t have any love for Arsenal like the supporters do. Sadly some supporters like his methods. To me they are not supporters. The history of our great club is a pointer that we should be competing at the top. Since Kroenke has arrived at the club we have been going downwards particularly on the pitch. Kroenke is a rubbish owner and the reason the club has ended up just about making the Europa League. Invest in players Kroenke or get out of Arsenal.

We dont even need to borrow money, just spend what we have i guess would be a start! Think we all like the idea of our club bein run properly but we need to spend what we already have to improve the team as the club itself is in good shape

Buy young players, develop them and sell them for £100mil that’s what Liverpool did and that’s how we will do it. The perfect storm would be for Emery to develop a few over the next few years then sell them for over priced transfer fees and buy 2/3 world class players and the cycle continues. That’s why Liverpool will be hard to catch bcoz there already in the cycle of buying 24 year olds and selling them when there 27, the good news is it can be done especially if we give young talent first team football. Take yacine Adli from PSG he’s 17 and wanted buy everyone including PSG but he refused to resign with them to play first team football at arsenal as Emery has promised him that so he is signing a 2 year contract with an option for a 3rd which is exactly the same as Emery’s contract at arsenal. We need to sign Torreira and soyuncu aswell bcoz all these players will go for 70/100mil in 3 years time if they become world stars and that’s when we can buy mbappe or dembele etc remember we are the ARSENAL we are bigger than Liverpool, Chelsea, Spurs and city and we haven’t sold one player for silly money yet but when are time comes we will do it better than the others! Just imagine if we hit the hights of 2004 in this day an age, money won’t be a problem coz when arsenal do it they do it big